When to Lift the Bankruptcy Stay in Family Law and Divorce Cases

Bankruptcy

Many times, when people are getting divorced, they are also having debt issues, and possibly bankruptcy may follow. I wrote about the issues that come up when deciding about filing for bankruptcy and divorce in my article: Bankruptcy and Divorce- Getting Through the Maze.

But, depending on the timing, bankruptcy can stop the divorce altogether.   More and more lately, Illinois family law judges have been stopping all proceedings if one party files a bankruptcy case.  It happens like this: you are proceeding through the divorce, child custody or child support case, and getting ready to have the family court judge make a ruling, or are all set to go to trial.  Then, the other side tells the judge that they just filed for bankruptcy protection.  The divorce court immediately halts everything.

The U.S. Bankruptcy Code, Section 362 (b) (2), allows divorce and child support proceedings to continue in most cases.  However, when the divorce proceedings deal with division of property, it is not allowed.  So, family law judges in Illinois have been reluctant to proceed once a bankruptcy is filed, to be sure not to violate the bankruptcy automatic stay.

Generally, debts owed to the other spouse, called “domestic support obligations”  are not eliminated by bankruptcy, but you need to also make sure that your rights as a creditor are protected.

In order to proceed further, the party to the divorce needs to request to lift the bankruptcy stay.  If your divorce was stopped, you are now the creditor in a bankruptcy case.  I have represented many people, who are creditors in their spouses’ bankruptcies, in stay relief motions, allowing them to continue with their family law proceedings.  Many times, the spouse needs to get the child support, or finish the divorce.  It is not always easy to do, because the person making the request needs to show cause, i.e. the reason this needs to happen right away.

Divorce attorneys and their clients regularly call me to get the stay lifted in Chapter 7 or Chapter 13 Bankruptcy cases,  for the divorce, child support, or child custody proceedings to continue, or they just call with questions. I can review your specific situation and develop a plan for the best action to take.

Daniel J. Winter

BankruptcyLawChicago.com

djw@DWinterLaw.com

312-789-9999

Offices in Chicago, Gurnee, Oak Lawn, and  Skokie, Illinois.